American court hearing recordings and interviews - Season 5. Episode 3. May 18, 2023. In re Virgin Orbit Holdings, Inc. et al., chapter 11 bankruptcy case number 23-10405, audio of hearing held in bankruptcy proceedings pending before the U.S. Bankruptcy Court for the District of Delaware

Episode Date: August 25, 2023

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Testing one, two, three. Testing one, two, three. Judge, witness, attorney one, attorney two, lectern one, lectern two, attorney three, attorney four. Person in the meeting under New York Conference Room 3304, please identify yourself. I believe that's our Latham, New York Conference Room, but that's part of Latham. Okay, Mr. Quigalmers, that's fine. Thank you.

Thank you. You're welcome. This is Juliet Sartesian. It says that from the U.S. trustees' office, I can't turn on my video. It says that the host has stopped it. I'm glad you can hear me at least. I can see you.

Oh, you can see me. Yes, I can. Oh, good. Okay. Okay, here I am. It still says I can't start my video because the host has stopped it, but you can see me, so that's all that. Okay.

Hi, this is Renee Ropinion from Raisner Opinion. For some reason, I'm listed as Jack Raisner. He's separately logged in. Good afternoon, everyone. This is Judge Owens. We are on the record for a virtual hearing in Virgin orbit. I'll turn the podium over to counsel for the debtors, and you can walk me through today's agenda.

Good afternoon, Your Honor. This is George Clodonis of Latham and Watkins on behalf of the debtors in these Chapter 11 cases. Good afternoon. How are you? Well, thank you. Today's agenda has one item, which is the disclosure statement hearing. My colleague, Ms. Burton, will be handling the principal argument there, but I wanted to just give a brief introduction as to where things are

and then hand it over to her. That's okay with you. That would be great. Thank you. Perfect. So, Your Honor, we were just before your court a few weeks ago, right, before Memorial Day weekend, on various. sale orders in these cases.

Just for the record, the company was in the process of selling five segments of assets, and following an auction, the first four segments were sold, and we're hopefully in the process of finalizing and closing the fifth segment. The total revenues that have come from, or rather the total proceeds that have come from those sales are approximately $39 million, with about $36 million to be distributed to the dip lender, which is the net amount. And so now with these facts, the debtors and the dip lender and the UCC started negotiating the terms of a potential Chapter 11 plan to try to wrap these cases up neatly if possible.

The problem is it becomes a little bit challenging when your dip lender is only receiving about $36 million of its $74 million dip claim and about $28 million of its pre-petition secured notes. But the dip lender has been willing to engage and attempt to... I guess for lack of the better term, sponsor a plan in a way that provides value to unsecured creditors. And so what they've been willing to give on, or at least try to provide recoveries for, are contributing certain amounts towards administrative expenses, the same goal for certain priority claimants, including worn claimants, and then the payments for general unsecured creditors in the form of $400,000 cash payment,

plus the payment of the UCC professionals, which the budget has gone up since the dip budget, and the opportunity to recover on whatever assets are left, on certain assets that are left over, including certain tax assets, that a plan administrator would essentially sell post-confirmation. I think what you might hear is that from some of the objecting parties is that there's a lot of value being left on the table with this proposal, but I guess if you look back at the secure debt wall, which is about $66 million, left, it's not clear, at least to us today, how there's value that gets to unsecured creditors with that kind of wall sitting there. So the debtors, in order to try to be efficient,

filed a plan based on the facts or based on what we know today. And what we know today is that there's about $66 million of secured debt sitting there, some dip, some pre-petitioned secured notes. We haven't seen anything to date that's challenged that debt or that is providing some kind of causes of action that would provide cash to unsecured creditors. And I believe a lot of the causes of action would be, if there was any secured debt left over, would be collateral under the dip. We've also seen a liquidation analysis that was put together by A&M, the financial advisor. It doesn't seem to be a clear path for creditors to get a recovery, even in a liquidation.

And finally, with respect to the Warren claims, we know there's an adversary proceeding filed, but it's unclear to us today if they have a real class who's in that class, what the amounts would be and if they'd be priority. So what you're hearing or what you will hear from, I think, some of the objecting parties, and I think we've resolved a lot of them, including, I believe, the U.S. trustees, but I'll let Ms. Cretion chime in on that, is that the process should be denied based on certain assumptions of what might happen. And what you're going to hear from Ms. Burton, that I'll turn it over shortly,

is that the DS is very clear about what people are getting and what the dip lender is willing to provide at this stage, despite its senior secure position. And so now we believe it's time to at least put a plan up to a vote, try to sort of wrap these up or wrap up these cases efficiently if we could, and give creditors a chance to recover something from these cases, if possible. So I'll just turn it over to Ms. Burton, if that's okay with you, Your Honor. That would be fine. Thank you very much.

Welcome. Good afternoon. Good afternoon, Your Honor. Can you hear me? I can, but I cannot see you. Is there a way to turn the camera on? I think we're working on. If you could just give us one minute, Your Honor.

There you go. I can see you. Thank you. Okay, wonderful. Good afternoon, Your Honor. Lisa Burton of Latham and Walkins, Counsel to the Debtors. Your Honor, as Mr. Clodotis mentioned there's one matter on the agenda today, and that's approval of the

disclosure statement. Before jumping into the disclosure statement and the documents and as well as the legal standard, I'd like to elaborate a little bit upon the update that Mr. Clodotas provided to the court, as well as provide a brief update on the status of the pending objections. The debtors have been working very closely with the objecting parties, including the committee, the United States trustee, and others, and have accepted or addressed all of the requested changes and inclusions to the plan, the disclosure statement or the disclosure statement order. We filed a revised disclosure statement order this afternoon shortly before the hearing as well as revised plan and disclosure statement order. And that's at docket's number 426 for the second amended plan, 428, or excuse me, and 427 for the order. With these additional disclosures, Your Honor, at this time, we believe that all of the party's objections with respect to the adequacy of the disclosures that have been addressed, and that voting class members are able to make an informed judgment under the plan.

The remaining objections that are open, we believe, relate to the patently unconfirmable standard with respect to the plan. And as I'm sure we will hear, the committee and others will allege that the disclosure statement should not be approved because, in their view, the plan is patently unconfirmable. From our perspective, the objectors have failed to demonstrate this very high bar has been met. So for purposes of my presentation, I think it makes the most sense to walk through first the terms of the plan at a high level since we just filed a revised version of the plan moments ago.

And then we can walk through some of the additional disclosures that were added to the most recent draft. And then, Your Honor, I'd like to turn to the patently unconfirmable standard if that would work for you. Thank you. So, you know, beginning with the terms of the second amended plan, as you are well aware, Your Honor, the debtors filed these cases with the goal of pursuing a competitive and a value maximizing sale process on behalf of all of the stakeholders. And less than two weeks ago, sorry, and less than two weeks following the petition date, the debtors filed a plan and disclosure statement that reflected this strategy and presumed that proceeds from a 363 sale. would be distributed to creditors. Of course, that additional plan and disclosure statement that we filed did not include critical pieces of information,

such as class recovery amounts and percentages, as well as the liquidation analysis and other information contingent upon the results of the debtor's auction and sale process that at the time had not been conducted. As your honor is aware, the debtors filed and ran a robust and competitive marketing process and auction, and on the heels of that process,

the court approved four separate asset sales with respect to four different segments of the debtor's assets. And then since entry of the sale orders, all four of those asset sales have closed, generating to date approximately $35.7 million. And then in addition, the debtors expect an additional infusion of no less than $4 million from the proceeds of a fifth asset sale of their, certain of their remaining inventory. Your Honor, I think I raise all of this to emphasize that the debtors and their advisors have been working continuously and tirelessly to achieve the best possible result and the best possible outcome for their stakeholders.

And that outcome of the sale process yielded proceeds less than what was expected or hoped for. Still, even under these circumstances, the debtors with the support of the dip lenders are committed to pursue a plan process that provides some. some recovery to general insecurities. Even when it is clear that under the best interest test, the general insecurities are not entitled to recoveries. The plan will also pay administrative and priority claimants

with funding provided by the dip lenders as well. So since we filed the original plan, the debtors filed two further proposed versions of the plan and disclosure statement. And as they stand today, the disclosure statement and plan reflect a vigorously negotiated settlement offered to the committee. Specifically, under the second amended plan, holders of allowed general unsecured claims who vote in favor of the plan

will receive their prorata share of a Gulf recovery pool comprised of, amongst other things, $400,000 in cash, plus a sliding scale of, finding scale percentage of net proceeds from remaining assets, asset sales, and any tax refunds available to the estate. The second amended plan also contains a convenience class for holders of allowed general unsecured claims totaling less than $5,000 or those holders electing to have their claims reduced to $5,000. And such holders who vote in favor of the plan may receive up to 50% of the amount of their allowed general and secured claims in cash, up to an aggregate of $250,000. The DIP lenders are also providing for the payment of $1 million in non-professional administrative claims.

These are virtually all of which relate to 503B9 claimants. And under the plan, claims related to the DIP facility or the pre-petition secured notes, such as deficiency or adequate protection claims, shall not be entitled to recovery from the GUC pool that I just described. Finally, Your Honor, the debtors have modified the terms of their releases under the plan. The releasing parties only include the pre-petition secured note holder, the dip lender and agent, and all holders of claves who vote in favor of the plan, and holders of claims who vote to reject the plan, but opt in to the releases on the form of ballots. Given the circumstances of these cases, we removed equity holders and claimants deemed to reject the plan,

as releasing parties, as well as released parties from that definition of releasing parties as requested by the SEC and the U.S. trustee. So, Your Honor, we believe these are meaningful concessions that provide holders of allowed general and secured claims with more than they would otherwise be entitled to under the absolute priority rule. And that this fact is clearly demonstrated in our liquidation analysis, and it's not disputed by any of the objecting parties, including the committee. So with that, Your Honor, I'm happy to walk through the disclosure statement, if you would like,

and mention the, you know, substantive changes that have been made right before this hearing, if that would be helpful. Yes, that would be helpful. Thank you. Thank you. Okay, so I have the red line that's at docket number 426. page 299 of 400 is the beginning of the disclosure statement. On page Roman numeral three, the red line reflects that we increased the GUC cash full to 400,000. We made additional disclosures in footnote two with respect to the committee's fees and their fee provision.

On the following page, we also added that tax refunds will be available as part of the GUC recoveries. The next change is on page 10. It's footnote 5. We added additional disclosure regarding the treatment of pre-petition secured claims. I apologize. I apologize. What number, PDF are we on? So I'm on, yeah, I'm on, it's stock at 426.

I'm looking at page 318 of 400, page 10 of the red line. Excellent. Thank you so much. I was able to get there. So the next one is on page 11 on the following page. We added the convenience class and then added an additional, disclosure about recoveries to that convenience class. That's footnote seven.

And then we also added additional disclosure in footnote six with respect to the GUC distributable proceeds range and where recovery ends up within that range. The next major substantive change is on page 388. 400 of the PDF, page 30 of the red line. Here we clarified or really conformed the UCC challenge period description to align with what is in the dip order. The next change is on page 341, 433 of the red line. We added additional disclosure on that inventory sale of segment five assets that I had previously mentioned that we expect to provide no less than $4 million of additional sale proceeds.

The next change is on page 343 of 400, or I guess page 35 of the red line. We added an additional disclosure here again about the convenience class treatment and their election and as well as disclosure about what would happen if a class for claimant elects to join the convenience class. Finally, Your Honor, I think the last sort of substantive change here is on page 353, a 400, page 455 of the red line. This is a SEC carve-out that was requested that, you know, provides that Doe provision will preclude. the SEC from enforcing their regulatory powers or police powers.

So those were all of, you know, the substantive changes to the disclosure statement that we had just, you know, filed just moments before this case. And, Your Honor, like I mentioned, we believe that these changes address all of the disclosure-related objections and the informal comments received by the debtors and that the disclosure statement contains sufficient information in sufficient detail to permit a hypothetical investor in the relevant class to make informed decision about voting on the plan. And this is the standard, of course, set forth under Section 1125 of the Bankruptcy Code. So I think unless Your Honor has any questions on the disclosures,

I'd like to next turn to the patently unconfirmable argument. That would be fine. I have no questions. Thank you. Okay, so turning to the second question that's, you know, relevant for, today's hearing, is the proposed plan patently unconfirmable? The debtors believe that that answer is clearly no. As Your Honor is aware, an objecting party must meet a very, very high

bar with respect to a disclosure statement objection if they are asserting what is essentially a plan confirmation objection at these stages at the disclosure statement stages of the case. Various courts have framed this patently unconfirmable standard as making it obvious that the disclosure statement, excuse me, as making it, the objection must make it, the objector must prove it obvious that at the disclosure statement stage, a later confirmation hearing would be futile or that the plan is so fatally flawed that confirmation is impossible.

The Third Circuit has held that a plan is patently unconfirable, where, one, confirmation defects cannot be overcome by a creditor voting results, and those defects concern matters upon which material facts are not in dispute or have not been fully developed at the disclosure statement hearing. and that's American Capital Equipment LLC 688F 3D 145 at 154. The committee argues that recoveries to general unsecured creditors are so low that no rational person would conclude that a plan would be acceptable by a general unsecured creditor class or by a claimant in the general unsecured creditor class. However, Your Honor, we disagree. The debtors have shown by their liquidation analysis that unsecured creditors are in fact better off under this plan than in a hypothetical liquidation scenario, where they stand behind over $100 million in senior claims. The committee also argues that the condition's precedent in the plan may make our plan patently unconfirmable, since we may have a scenario where priority claims are not paid in full. Specifically, we've heard that the committee has taken issue with the aggregate amount of

allowed priority-worn claims to be limited to $100,000, the estimated allowed administrative claims to be limited to a million dollars, and the aggregate amount of allowed professional fee claims of the committee to be limited to $1.5 million. $1,000. First, Your Honor, I think it's important to note that these numbers were reached by the debtors in consultation with their professionals, and were after analysis, and were based on reasonable grounds. The $100,000 figure comes from the actually filed warrant priority claims on the claim's register. The $100 million figure is reasonable based upon the debtors' assessments of their own operations in 503.3.3.5.5.5.5.5.5. B9 claims, and the $1.5 million figure comes from the committee's budget itself plus a cushion. And I could also add that the $100,000 figure also includes a cushion.

So, again, we think that these numbers are reasonable and have sufficient basis to be backed up. But moreover, and more importantly for today, the size and allowance, of these administrative claims is an issue based upon a disputed fact, and it's therefore, or facts, plural, and therefore premature at this time. So the fact that we do not, so the fact that we have a reasonably estimated administrative claim figure amount included in our plan does not make our plan patently uncomfirmable. Lastly, Your Honor, I'd like to briefly address the additional response that was filed yesterday by Vladimir Boyko on behalf of the purported Warren class in the adversary proceeding.

In their initial objection, Mr. Boyko took issue that the definition of general unsecured claim included the purported Warren class claims. As I've mentioned, we have amended the plan and disclosure statement and now provide that the Warren class claims fall within the definition of priority claims, which will be unimpaired. So from a disclosure perspective, we believe that their objections have been addressed. However, in his response, Mr. Boyko also alleges that the estimated amount of the priority portion of his purported class claim is at least $2.1 million. And because the debtors disagree with this figure, the plan is not for the court. feasible and patently unconfirmable.

Again, Your Honor, we believe that this is a substantive issue that is bet to be addressed at plan confirmation and not at a disclosure statement hearing. And indeed, all of the procedural posture for all of the cases cited in that response related to confirmation orders or appeals of confirmation orders. Your Honor, the debtors also believe that granted, the admission of Mr. Boyko's purported class claim in the alleged amount of $2.1 million at this stage and based only upon the commencement of an adversary proceeding is premature. The response categorized the plan as seeking to, quote, disallow the purported class claim.

This would assume that the $2.1 million amount should be allowed and accepted at face value and baked into the debtor's plan. But the law is clear, and we have found no case that stands for the proposition that putative class members are excused from filing proofs of claims or cannot be subject to a bar date, or that the filing of an adversary proceeding in and of itself suggests that a purported class should be treated as though it has been certified and allowed to file a class claim. As Your Honor is aware, there are additional substantive steps that need to be taken in order to allow for a class coup of claim to be filed in a bankruptcy and these steps have not been taken to date,

even though the adversary proceeding was commenced on the petition date. But to reiterate, Your Honor, the focus today is the adequacy of the disclosure statement. And for the reasons that are set forth in our reply and the reasons that I've raised today, we assert that the disclosure statement is sufficient and meets the standard. under the Bankruptcy Code. And with that, Your Honor, I'd kindly request approval of our disclosure statement. I have no questions at this time,

but I'm happy to hear from any objecting parties. Just before objecting parties, Your Honor, this is Joshua Stern from Davis-Boke-and-Wordwell on behalf of Virgin Investments Limited as the Pre-Pedition Secured Party, dip lender and dip agent. I'm here virtually with my colleague, Brian Resnick, and Elia Moskowitz.

I'm just rising at this point to confirm that we echoed the debtors arguments believe approval of the proposed disclosure statement is appropriate today. But we do anticipate that objectors may make allegations about our client. So to the extent that any of those allegations are relevant to the relief requested today, we reserve our right to respond to the appropriate time. Okay. Thank you very much. I understand. Anyone else that wishes to be heard in favor of approval of the disclosure statement before I turn to the objecting parties?

Would you like to be heard? Yes, Your Honor. Thank you. Good afternoon, John Beck of Pogne Levels on behalf of the official Committee of Unsecured Creditors. I first wanted to thank Your Honor for entering our retention orders this morning. We greatly appreciate your quick attention to those orders. Turning to the disclosure statement, the committee filed an objection to approval of the disclosure statement at docket number 405. That objection was filed prior to the debtors filing their first. revised disclosure statement and plan, and of course, also before the second revised plan and disclosure statement,

which was filed within the last hour. Although the debtor's revised plan and disclosure statement does address the committee's specific disclosure request, the committee does believe that this plan, even in its revised form, is patently unconfirmable, and perhaps more importantly, that soliciting this plan that is not, going to be confirmed is a waste of limited estate resources at this time. I think it's first important for your honor to understand what consideration is being proposed actually being proposed to the general insecure creditors. The second revised plan increases the gas the cash guck amount to general unsecured to

$400,000 and it also has non-cash consideration of any savings from the committee professional fees under 1.5 million and a sharing arrangement of the proceeds from the sale of any remaining assets in the estate, which in theory could generate up to $3.5 million in additional value. However, as we have repeatedly informed the debtors, the committee professionals are already in excess of $1.5 million, and so the provision suggesting that there is any value for unsecure creditors is entirely illusory. We would prefer that that provision be struck entirely, but at least, the debtors have agreed this morning to properly disclose that the committee fees are

currently in excess of 1.5 million so that hopefully creditors in voting understand that that is not actually a bucket of value that is going to be provided to them. Similarly, the committee's view is that the value of the remaining assets to be sold is at best a few hundred thousand and the range that is provided at the disclosure statement, we believe, is misleading when compared to the practical reality of how much those assets are actually worth. In response to this comment, the debtors have agreed to add a disclosure to the disclosure statement that the committee believes that the recoveries for remaining assets are expected to be at the low end of that provided range. But I just want to make it clear that once those proper disclosures are included, we think, that the plan is offering little more than $400,000 to unsecured creditors and any suggestion otherwise is really just an attempt to artificially inflate what's

the consideration being provided to general and secured creditors actually is. Now compare this with the size of the gut pool of in excess of $100 million and the debtors estimates potentially up to $115 million, that means that if it's at the low end of this remaining asset sale range, unsecured creditors will get less than one-half of one percent return for general unsecured creditors in exchange for providing broad releases in this plan to numerous parties. And we think that that bargain is something that is clearly impossible for unsecured creditors to accept.

And we think that in recognition of this fact, the debtors have filed. a second revised plan, you know, only an hour before this hearing, that for the first time now creates a convenience class, providing that holders of claims less than $5,000 will get a 50% return up to an aggregate amount of $250,000. So we think it cannot be any more transparent, given the timing and the prior iterations of this plan, the purpose of this convenience class is to improperly gerrymander the vote and to try to cram down the plan on general and secure creditors who otherwise would never accept this plan.

Permitting the debtors to proceed on this basis, we think will only increase administrative costs by having a contested confirmation hearing on good faith and gerrymandering of the vote, including discovery leading up to that confirmation hearing that the committee would be entitled to regarding the formulation of this class and the good faith of the debtors.

And we don't have to argue all the gerrymandering issues at this point, but we think that it's obvious that a convenience class is not reasonable and necessary for administrative convenience here. The debtors have filed two prior versions of this plan that did not include a convenience class, and they've only amended the plan at this point because they know that the general insurer creditors will not vote in favor for this low of a consideration. Now, is that a fair statement given that one could argue that the letter that you want to send out is the reason why the creditors are going to vote now? Well, Your Honor, I think that the committee should be entitled to give its views to the general insecure creditors. Sure, but isn't the causal connection of the voting for no at this point likely to be the result of that letter? That's certainly possible, but we think that creditors can look at the amount of the claim and the estimated recoveries

and clearly come to their own determination that less than one-half of one percent is not sufficient in order to get a release from them. And second, I mean, one of the issues here is that this little consideration is being provided in exchange for debtor and third-party releases that you cannot opt out of. If you vote in favor of this plan, you are providing a release. and so we do not think that that is appropriate, given the little consideration in this plan, and believe that creditors should be required to opt into the releases if they so choose in order to provide that, and at the very least should have an opt-out mechanism so that if they vote in favor of the plan, they can still opt out of the releases. And we think that that's particularly appropriate in this instance,

given the small amount of consideration that is being provided, Your Honor. Where is the alternative source of a recovery for the unsecured creditors in this case? Sure, Your Honor. So, as you know or may know, but our challenge period ends on June 20th, and we have been investigating claims both against the pre-petition debt and the roll-up, which is subject to the challenge period, and affirmative claims against VIL. And although our investigation is not done, we do expect that we will file a motion for standing that attaches a complaint, and we will assert a tax against the pre-petition debt in full,

which then would also prohibit the roll-up, and then we will also assert affirmative claims against VIL. And if necessary, if a conversion is required to preserve those causes of action for a trustee, to proceed against them, and then monetize assets for the value of unsecured creditors. that's the alternative here. And when you're talking about such a small return, why should unsecure creditors not take that chance? Because all that that has to do is result in a settlement of more than $400,000 for it to be worth the value to the unsecured creditors.

Okay, thank you. And so finally, Your Honor, we think it's also, the plan is also patently unconfirmable because it includes three conditions that to conditions precedent that we do not think can be met here. One, as I mentioned before, the committee's fees are already above 1.5, so to include a condition that they are less than 1.5, we think is inappropriate. Second, and a similar strategy, I guess, is that the plan also requires that the Warren priority claims be allowed at no more than $100,000, which, as the Warren claimant's objection makes clear,

is well below the asserted priority portion of their claim of $2.1 million, and we're not suggesting that the debtors have to accept the $2.1 million is the correct figure, but the point is if that amount is allowed as a priority claim, this plan has to pay it in order to be confirmed. There cannot be an out for VIL to not pay admin, and priority claims in full and go down this solicitation process and then walk and leave us with a lot more administrative expense due to a contested confirmation hearing and a solicitation process and then at the last minute pull the rug out from underneath VIL needs to commit to pay all admin claims allowed admin claims and priority claims in full and finally the last condition your honor is that the plan provides that it is a condition precedent that non-professional admin claims do not exceed $1 million. And they've tried to rectify this issue by adding an estimated admin claim concept, but there is no mention of what happens if their estimate is wrong. The point, as I

reiterated before, is that if there isn't allowed admin and priority claim, it has to be paid in order to confirm this plan. Each of these provisions effectively gives VIL the ability to pull the plug on the plan and not to fund admin and priority claims is required by the bankruptcy code and we think makes this plan patently unconfirmable. And the debtors and VIL in their reply, and Ms. Burton alluded to it in her remark, they argued that the sale proceeds were so low that there's simply no value for unsecured creditors, and VIL has already lost a lot of money. We don't dispute any of that.

We understand the dynamic here. But VIL was also an equity holder who made an investment of over a billion dollars. They put $100 million in this company in the last six months. They knew that they were running out of cash after the business. failure of the D-SPAC transaction, and instead of making further contributions, they provided an unsecured loan that they later attempted to retroactively secure in connection with subsequent advances, and in the meantime, they continued the business of the debtor taking deposits for orders and incurring other unsecured claims that they knew they had no ability to pay, all under the

influence and control of their controlling equity holder, VIL. On the eve of bankruptcy, VIL used this dual position as a reported secured lender and controlling equity holder to force the debtor to accept a loan with onerous conditions, including a fast-paced sale timeline, and require the debtors to release a valuable trademark, the virgin trademark name. Now VIL has chosen to avail itself of the benefits of this courtroom and this bankruptcy process, and even if it ultimately did not receive a return on pre-petition debt, it has received a benefit in this case. It has received a centralized forum to maximize the value of its assets, including being able to offer buyers a free and clear sale order, and it has received a centralized forum to orderly wind down its portfolio company. It's now asking this court to approve broad releases for numerous parties, including the debtors, directors, and officers, its auditors, its investment bankers, and numerous other parties, and to release and vary preference actions, which may be the only value for general and secure creditors. If VIL is going to avail itself with the protections and benefits under the Bankruptcy Code, it must pay the price for that process. That price is, at the very least, payment and full of admin and priority claims, including allowed professional fees, and we believe a proposed distribution to unsecured creditors that is sufficient to obtain their vote in support of the plan.

The answer, Your Honor, is not for VIL and the debtors to further abuse this process by gerrymandering a vote to avoid the consequences of not providing consideration sufficient. to achieve a yes vote from the unsecured creditors, and it is not to include conditions and low consideration in the plan and build in a toggle mechanism that automatically converts to dismissal if the general unsecured creditors do not vote to confirm. So, Your Honor, we strongly believe that the debtors should not solicit this plan and the parties should have a mediation to try to reach a consensual resolution on a plan that can then be confirmed and solicited,

And if the parties can't reach that resolution, then the debtors can move to dismiss or convert the case at that time, and the committee will reserve all rights with respect to any such motions. But soliciting and then litigating over confirmation of an insufficient and gerrymandered plan that we believe is clearly not going to be confirmed or capable of even going effective given the conditions and practical realities will only add unnecessary administrative burden to this case, which it cannot support. So unless Your Honor has any questions, I'll cede the podium to any other objectors. Okay, thank you. I have no more or further questions at this time. Happy to hear from other parties who still maintain an objection. Good afternoon, Your Honor.

Chris Loisidis or Vladimir Boyko as a representative of a putative class of Warren claimants. First of all, I am joined by my colleagues, Jack Raisner, and Renee Verpennian of the firms of raising their own opinion, both of whom I've been admitted pro hoc BHA, but I will be addressing the court in the first instance. Your Honor, first I would like to apologize. I've had some technical issues because my, frankly, my laptop seems to have conned out right now, so there may have been some issues before with my not being muted. I apologize to the court to others for that. but I'll turn directly to the suppressive issue, Your Honor. We did file a response yesterday to the debtor's proposed plan amendments,

not the latest set of plan amendments, but the one that came before that. I don't know if Your Honor has a chance to review it because I think it was just delivered with the most recent agenda. It's pretty short. But the key, as I understand the revised plan that they filed in part in response to our objection, They have made the effective date of the plan conditioned on the worn claims being substantially disallowed. I know they put it in $100,000. And I just think that that is an extremely, I'm not saying it's never been done before, but we would submit this a highly irregular way of addressing or really not addressing priority claims.

obviously 1129 a9 requires that priority claims be full be paid in full excuse me on the effective date of the plan and essentially what they're doing is more or less ticking the can down the road on those to say well if we lose the warrant action then we just the plan doesn't become effective and we just convert and it seems to me your honor that they've put the cart before the horse that if our priority claim is basically a plan breaker we ought to have that claim resolved one way or another before going through the expense of a confirmation process. As we've said in our response, if the court were to approve this, and I do understand that this really is a confirmation objection, but nevertheless, it's not as if something is going to change between now and the confirmation hearing.

If the court says that this is okay, this could really be a recipe for future cases where all you have to do, if you have some priority claim that you don't like or you can't pay, is you just say if the priority claim is allowed, then the plan number becomes effective and we convert. And as I said, Your Honor, I think this is something I want to be addressed beforehand. It's not as if they have known about this claim. We filed our adversary proceeding on the day the case filed. So they've known about our case literally from day one.

They have raised the issue about the fact that we filed this as an adversary proceeding and did not file a proof of claim. We have cited a case in our papers on this. pardon me a second. I'm sorry, Your Honor, but the top of my ass. This is cited under papers, Your Honor. It's TSC Global LLC. This is 2013 Westlaw 650-2168. Essentially, Warren claims are considered to be equitable in nature, and therefore it has been held in that case and others that one claims can be pursued through adversary proceeding rather than by filing a proof of claim. This has been a practice that has been true in dozens of cases in this court, Your Honor,

and to my knowledge, except maybe once nobody has ever raised that as an issue before. At worst, I think you could say that this is an issue of a formality. The debtors have known about this claim from the very beginning. There's also a comment that I would like to respond to, and that is they say, there's a disagreement between the debtors and the worn claim as to the face value of the claim. Obviously, it's a contested claim, obviously. So there's a disagreement about liability, I assume, as well. But apparently the debtor's position is that the claim should be about $100,000 or something and we're claiming $2.1 million.

Well, normally in these Warren actions, it frankly isn't that difficult to figure out what the face value of the priority claims are. the big fights in these cases, and Mr. Raisner or Mr. Rupinia may address this better than I can, but the big fights in these cases tend to be about liability, not about damages. I mean, you can have some fights about damages at the margins, but once you find out who is covered, it's just a matter of multiplying the 507, A4, and A5 priority cap by the number of employees. That's really what it comes down to. I guess there may be some people don't hit the cap, but it's not, let me just say this, we could be off by a whole order of magnitude, right? It could be $210,000,

and we're still more than twice their $100,000 cap. So in sum, Your Honor, it seems to me that we're going down a path that just doesn't make any sense. We're going to go through an expensive confirmation process, and at the end of that process, if the court confirms the plan, we're not going to have that plan that goes effective at that time. Instead, we're going to have the cost. Instead, we're going to have to find out what happens to the Warren claim. And in fact, if the Warren claim is allowed in anything other than effectively a nominal amount, the case is converted and it's over. And I just don't think that is a sensible way of proceeding. And I respectfully suggested the court that this would not set a good precedent as it could become, as instead of doing what you're supposed to do in her view,

reserve the face value of a claim that this could be sort of an alternative procedure. One last thing I would like to mention, and that is if we are going to go forward, we would like to know sooner rather than later what is going to be on the table at the confirmation hearing. And the reason I ask that is because of a prior experience in another case, FMGC before Judge Goldblatt. In that case, I believe less than one business day before the confirmation hearing started, the debtors filed their brief in support of confirmation. and that was the first time we ever learned that the debtors in that case. Different case.

We were seeking to estimate the Warren claims at the confirmation hearing. And I apologize, the defendant of it in front of me. The primary case that they relied on was actually Your Honor's decision in, and I don't have the case in front of me. It's Teppana, is that right, Your Honor? Oh, it's my decision? Did you say it was a decision that I made? Is it Tonapaw? Yeah, I think that's it.

It was a case where. as I recall, Your Honor effectively capped. This was an unsecured claim under 100% plan. That's something like 2 million words that face value was like $100 million. And Judge Goldblatt said he read Your Honor's decision very carefully but helped that it was distinguishable, in part because our claim was a priority claim, and in part because that was an unusual situation where you had 100% plan and essentially was a ride-through. plan and that effectively the debtor would just would just be paying everybody a hundred cents on the dollar so it became a different issue here we have a code provision

1129 a9 that says that priority claims have to be paid in fall and obviously if it's a contested claim arb u is that you need to reserve for it and not have a plan provision that says your plan number becomes effective if the priority claim wants it being allowed but also say your honor for that at least as i read the decision was you obviously if you're just reading it, you can't always tell, but it seemed that in that case, that was an awfully speculative claim to put it mildly and to put it charitably. Obviously, this is a contested claim, Your Honor, but this is a worn claim we believe it's basically well-founded. There's obviously going to be disagreements about it, but I don't think this is some pie in the sky

claims such as was involved there. And in addition to that, unlike that claim, Warren claims are fairly susceptible to being. calculated. It is, I said, normally the fight is really over liability or the damage. Unless the court has any questions, that's really all I have. I do have one question and you discuss that the issue really is comes down to liability and then damages. Isn't the issue really here class certification in that if you don't and correct me if I'm wrong, I'm just trying to think through these issues but if you're not certified then you don't have a class certification,

claim that can be pursued. So wouldn't the threshold question here be class certification? That is correct, Your Honor. I mean, but look, look, we have provided a consensual extension of the answer date. I suppose we could file the motion for class certification before they even answered, but that's not a typical way of handling things. We are certainly willing to proceed as expeditiously as possible, Your Honor. I think the point is that these claims have been established.

asserted. They've been asserted as priority claims. I can also say that I cannot recall having handled dozens of these cases here in Delaware. My co-counsel has handled many more here and throughout the country. I don't know of any case where we have not prevailed on class certification. I know there was a NSA case, there was some cutting back of the class, in other words, how the class was defined, but at least in this court, I didn't many other courts as well, for very good reasons. It's a and how that adjudicating a warrant claim through class process makes a lot of sense because each individual claimant does not have a sufficient incentive to litigate the claim on their own. That's a practical matter where we only talk about the priority portion.

It's rare that the general unsecured portion is paid much. And of course, that's capped at $15,000 in change and it hardly makes sense for each individual claimant, most of whom are obviously, you know, not necessarily well-heeled or particularly sophisticated people. I mean, they may or may not be, but it's just not practical for these individuals to try to pursue. What really is, it may seem like a simple thing, but there's a lot of exceptions and exceptions to exceptions in the Warren statute. It's certainly not something that somebody can pursue pro se or without having highly specialized counsel involved that can be involved if you have class certification. But the point is, Your Honor, I understand that they may, they have the right to oppose class certification. We don't have a certified class yet, but the claim has been asserted.

It's been asserted as a class claim. And in our view, Your Honor, the debtors can't just ignore it, basically, and say that if at the end of the day, the class is certified and they can't pay it, that the plan never becomes effective and then we convert. I mean, unfortunately, if that is where we're going, anyway. I would respect least to just save the cost and deal with it now. But not that we want the case to convert, Your Honor. But again, it just seems that this is a putting, he's just kicking the can down the road

in a way that is not, at least that I have not seen before, at least not very often in a way that I don't think would really make sense in terms of the way the expectations are of the code structure as to priority. claims. Okay. Thank you very much. I do understand your argument, and I appreciate your points. Thank you. Your Honor, this is Jack Raisin. If I could just drop a footnote for your question, raise your opinion on behalf of the Boyko class. Your Honor, there is a concept of a breathing room in especially tight chapter 11 cases where the debtor and committee are working full steam ahead on

trying to get to sale and plan, which are the foremost objectives of the bankruptcy. And in that case, we take a step back and do not press class certification as a front burner item because in general, everyone will agree that it doesn't matter whether you have a class if it's not going to be in a state. In this case, there is a class about which there is no contention in terms of its being certifiable. The amount of the estimate of our that we provided is of the minimum for class. It could be expanded perhaps or not, but the core class about which there isn't any dispute is represented by that figure.

And so the idea is to hold off on class certification and to try to have a settlement class so that there's only one go-round where notice has to be sent and alleviates cost. of motion practice alleviates cost of mailing in most of the Delaware bankruptcy cases that we've been in as Mr. Lloyd Zedes mentioned not only has it the class been certified but there is a paucity of any decisions about it your honor because it's been consensual okay i've had the opportunity to rule on this issue in the southland case so parties can refer to my decision it was or it was an oral ruling in that case but it was not a warrant act class but i have had the opportunity to rule on this issue, and so that might be helpful to the party's analysis going forward if we get there. I mentioned the Klausner-lumber case where there was two consensual classes that were agreed to by the parties without the need for motion practice.

Okay. That's basically the standard. Otherwise, we do join with the committees of Jets, then, Your Honor, in terms of having worn be used as a condition for this semester. and conversion. We don't think that's reasonable. We don't think it's reasonable to have a $100,000 cap. And there were basically two versions of the reality. One was mentioned at the outset by Mr. Clodonis,

who said that, well, there is discussion. The lenders are thinking about, warn about priority amounts, some lack of clarity about what the class is, versus the presentation about the reasonable. of the disclosure statement as it stands, which basically ignores Warren completely. Those are two versions of reality. And if the disclosure statement were to at least reflect the reality, which is often the case in most disclosure statements, there's a warrant case. The warrant claimants

claim they have liability up to a certain amount. The debtors disputed and reserve all rights. But at least there is some notion in the disclosure statement of the magnitude of the Warren claim and the fact that there is a dispute about yet but retina and not this categoric. It's got to be kept. It's got to be ignored. So the disclosure statement is peculiar and unusual in their, and it's categorical ignoring of the Warren claim, state of affairs of the Warren claim.

And so we would much, we would, you know, support a disclosure statement that gave a disclosure statement That gave a truer picture of the reality of what is happening. Thank you, Your Honor. Well, Mr. Reisner, to that point, what would you want to see? I have not had the opportunity to study in depth the current disclosure statement. But with respect to the Warren claim disputes, have you provided language to the debtors that would provide more fulsome disclosure that you feel would be a better approach? We weren't asked to do that, and the admission of Mr. Clodonis to the court is news to us that the lender is willing to consider funding a priority amount. This is news to us, given that we might be able to fashion something that would preserve the spirit of what he has just articulated.

Okay. Well, since we don't have actual language that's been exchanged, what concepts are missing from the disclosure statement that you would like to be included? The statement would soften the idea that there is no worn claim to be discussed because there is no proof of claim, to omit that and to adopt what is basically the convention, which is the law. warn adversary claimants are making have a claim which they estimate to be a certain amount on the parties are in disagreement but the parties are seeking a method or are in discussion in order to work some methodology in order to resolve that claim thank you I appreciate that I put you on the spot and I appreciate you answering my question not all I appreciate you're asking you thank you your honor all right thank you very much

Ms. Archesian, I see you came on my screen. Yes, Your Honor. I don't know if there's anybody else that wishes to speak. I just wanted to put a small statement on the record once everybody else was done. Well, why don't you go and then I'll ask if anyone else wishes to be heard. Thank you, Your Honor. For the record, Juliet's Sarkeesian on behalf of the U.S. trustee. Debtors Council is correct that I had given them some comments to the disclosure statement.

Some comments to the plan with, but with, of course, reserving all confirmation objections, and then comments to the disclosure statement form of order, the notices and the ballots, and I do appreciate that they worked with me to incorporate those comments. I do, oh, just in one thing I, I just as we heard during the hearing, I was looking through the last version of the disclosure statement order, ballots and notices that were just filed the red line. I saw a few what I would call cleanup just typos and things of that nature. So I just want to make sure that I can give those changes to debtors counsel before any order is entered. They're minor, but I think they're important.

And then I wanted to mention that I do have some concern about this last-minute creation of a convenience class. At this point in time, the U.S. trustee is not taking a position. And obviously, committee council spoke to that. But I didn't, I haven't had sufficient time. I mean, I was alerted to this as a possibility yesterday evening. So I did have a little bit of a heads up, but I haven't had sufficient time to consider it. And, you know, we reserve the right with respect to any confirmation objection in that regard. Thank you, Your Honor.

Thank you. Okay. Would anyone else wish to be heard in connection with the disclosure statement? Okay, I'm not hearing anyone. Ms. Burton, I'm happy to hear from you and brief reply. Thank you, Your Honor. If I could just request five minutes of the court to get my notes in order, and then I'm happy to give a quick reply.

That would be fine. Let's take a five-minute break. I'll be back on at 3.30. Thank you. Recording stopped. Good afternoon. This is Judge Owens. We are back on the record.

Ms. Burton, are you ready to proceed? Yes, Your Honor. Can you hear me? I can. Thank you. Lisa Burton on behalf of the debtors for the record. Your Honor, I will try to keep my replies brief. First, to address Mr. Beck.

We believe that Mr. Beck of the UCC is speculating about the existence of claims to be pursued and the outcome of those possible pursuits of those claims in his history. of those claims in his construct and in his view. You know, the UCC needs to get standing and have that standing to be approved and it needs to recover what Mr. Beck had admitted in his presentation was a $100 million investment in order to obtain recoveries for the UCC constituents

for the undersecured creditors. The plan, as it currently stands, provides for a floor recovery, and certain potential upsides as well as access to taxes and other possible sources of recovery. And, you know, Mr. Beck's objection is making the decision that an uncertain and highly speculative recovery or upside, potential upside, is greater than the certain recoveries, the limited, provided for in the plan. and we believe that does not raise an issue with respect to approval of a disclosure statement and is more of an issue for confirmation.

Similarly, Your Honor, with respect to the scope of releases, which was mentioned by Mr. Beck, the Clay's law is clear that releases are a confirmation issue, and we have limited the released parties and the release parties. we have changed the mechanism from an opt-out to an opt-in. And I think there's a significant case law, including, I think, GNC and Zohar, about the fact that if it approved, if an approving accepting class votes in favor of the plan,

a creditor votes in favor of the plan, that is consent, and that it should be enough to demonstrate their consent to the releases. We also take issue with their characterization of gerrymandering. First of all, by adding the convenience class, we've improved the recoveries of the unsecured creditors. And we'd also like to mention that this construct of a convenience class was initially a proposal that was put forth by the UCC that we accepted. And next to the objection of the war in purported class claimants, first I'd like to again reiterate that as they admitted in their presentation that this is a confirmation issue and we wholeheartedly

agree, I believe that it's not a basis to not approve the disclosure statement at this time. We also think that in their presentation they were making a number of presumptions that were not necessarily based on the facts that we have before us. They're presuming that their class will be approved without having sought motion under 7023. They were making the assumption that the value of their claim should be no less than or at least $2.1 million or that it's easy to calculate. that claim without having provided any evidence either in their reply or in the adversary proceeding or in their objection to support that point and you know we we think that the hundred thousand dollars that we estimated was rational and based on the facts that we have at hand which is what's been filed in the claims

register. Finally, I'll also quickly mention, Your Honor, that we do have disclosure in the disclosure statement with respect to the Warren adversary proceeding. That's at page 33 of the red line, 341 of 400 of the PDF. That was just filed at docket 426, excuse me. I apologize. What number was that? So it's page 341 of 400. I'm looking at the PDF redline. And it's page 33 of the red line. It says warn adversary proceeding, the puritive class action adversary proceeding,

asserting Warren claims under the Federal Warren Act and the California Warren Act was filed on April 4th. The Warren claims purport to cover all individuals included in a RIF. and collectively the purported Warren claimants as a class, but no class has been certified, no certified class proof of claims have been filed, no detailed assertions of the number of plaintiffs have been made. Only one individual proof of claim has been filed to date on a priority basis, which proof of claim is for approximately $30,000. And the Warren claimants, however, have asserted that their priority claim is higher than the debtor's estimates, and the debtors dispute such claims. For the number of reasons, including the court,

because no certified class proof of claim has been filed. Again, so we believe this disclosure is sufficient with respect to the Warren adversary proceeding. And if they have additional disclosure that they would like to drop us for us to include, we would be open to considering that. And finally, the last point I'd like to make was I believe Mr. Raisner misinterpreted

Mr. Clodotis' statement. that VIL is willing to fund priority claims up to a certain amount. He is, VAL is not willing to fund carte blanche priority claims. Okay, thank you very much. And that's it, Your Honor. Okay, thank you. Your Honor, if I may briefly respond? No, I don't think it's necessary.

I'm ready to rule. I'm going to overrule the open objections on the disclosure statement. I find that the debtors have met their burden to satisfy 1125. I'll note there's one open disclosure objection, and that is from the Warren Act claimants. I see no reason to modify the disclosure statement on that issue. I think it is the disputes are made clear, and I don't think any further disclosure is needed on that point. The remaining open issues are confirmation objections, and the objecting parties have not shown that the plan is patently unconfirmable. The party's objections, in my opinion, amount to a disagreement as to plan structure and case management.

Here it is the debtor's right to propose their plan. Moreover, your arguments depend on succeeding on disputed issues, and it's premature to prejudge those issues. And quite frankly, prejudge what the creditors will think and vote on in this case. To that end, I took a look at the committee's letter, and I have some concerns. about the letter because I don't think it's specific enough it's very it's very broad and and of course it's in your discretion to put forth a letter that's broad but I believe it's in the interest of creditors in this case to to understand more clearly what the complaint what the claims are that the committee intends

to pursue what the value of those claims are projected to be and what that would mean for the debtors or for the unsecured creditors recovery in this case. The general unsecured creditors are entitled to understand the committee's thinking on this issue. I understand that your challenge deadline is not until the 20th, but we're here on disclosure and it's necessary. And so the time now is to put that in the letter. So I would ask that you amend the letter to consider my concerns and to more clearly more clearly lay out to the unsecured creditors the committee's position in this case i make

no judgment as to what those issues are i don't i haven't i have not considered them but given where this case is headed based on the presentations of the parties it's important for that to be laid out i have concerns or questions with respect to the solicitation order i don't think they're will be problematic, but I would like to run through them. So Ms. Burton, are you the person that I should address the changes with? Yes, Your Honor. You could just give me one moment to grab my copy of the order. And I have not had the opportunity to review the revised disclosure statement order.

And so if you could please run through that disclosure statement order first, and perhaps some of the changes that you've made might address some of the changes. changes that I have perhaps and so it would streamline my comments. Your Honor, while Ms. Burton does that, I just wanted to say for your honor that we're happy to provide more detail in the letter. That letter was filed attached to our objection which was before the current plan and also before we did an interview of the CEO and the CFO so we have more information and we are willing to supplement that letter. That would be great. And is it my understanding

that it will be going out in the solicitation package or is it intended to go out by separate mailing? We haven't discussed those logistics yet, I think, in the solicitation package, most likely. Okay, well, I guess I would, I apologize. Let me just, if it is intended to go out with a solicitation package, then of course time is of the essence. And so I would ask the parties to work expeditiously to get that letter finalized because it will hold up solicitation. and we need to meet the deadlines under the code. So I'm okay if you want to separate that, but it's your choice. Thank you, Your Honor.

Lisa Burton on behalf of the debtors, the disclosure statement order that was filed at docket number 427, that was filed just prior to the hearing this afternoon. That's the order we should run through it. Yes, that would be great. I have it up on my screen, but I have not had the chance to review it. Okay. So the first change here is on paragraph C, page two.

We've added a class five ballot. This is for the convenience class. The next change is on page six. This is where we define the voting classes, which is going to be the class three, pre-petition, unsecured notes, the class four, Gux, and the class five convenience class. on page 8, again adding for the convenience class and the additional ballot, which is going to be sent to them, which is Exhibit 2C.

The next section is paragraph 9, or page 9, paragraph 18. I think here we're just accounting for the change in class numbers of the non-voting classes, since class 5 is now a voting class and class 9. is now what used to be class 8. So the next change is on page 12. We note that the debtors will serve the confirmation hearing notice on all holders of claims or interests, whether in voting classes or non-voting classes. So all parties will get decomeration hearing notice.

On page 14 in paragraph 33, we just removed the proviso, proviso, with respect to paragraph 22. about whether two or more ballots are cast. Your Honor, I just wanted to just to clarify the reason for that was that was a, it was a request of mine. I'd initially put in that reference to paragraph 22 was a paragraph that is now been taken out. It had something to do with mass ballots or whatever it was. It was totally removed so that no longer made any sense.

Okay, thank you for catching that. The next change is on page 17, paragraph 43. We note that the rule 38A motions must be filed with the court no later than the initial deadline, which is now June 27th. It was moved back between the originally filed disclosure statement order and the first amended disclosure statement order. and then and that's the change there we've deleted

the rest of the paragraph Your Honor I'm at this time I'm unaware of any claims objections that the debtors will be making prior to the disclosure state prior to the confirmation hearing and I believe those are all of the changes

okay thank you for running through those changes you did capture some comments that I had and I appreciate that I'll just go in order and we can talk through my changes. I'm just looking at my chicken scratch, so please bear with me. Paragraph 36,

and I'll give you a minute. It was on page 17, well, it was on page 17, but I'm working off of an old, the old version. Is it notwithstanding anything contained here out of the contrary? Correct, and it talks about what the claims agent may do in its discretion by contacting parties and asking them to cure

or allowing them to cure defects. I have no issue with that, but to the extent that they do contact parties, certain parties, to cure defects, and that occurs, I would like it to be on the voting declaration. Absolutely.

Okay. Paragraph 38 contains a following statement. If a class contains claims eligible to vote and no holders of claims eligible to vote in such class vote to accept or reject the plan. The plan shall be deemed accepted by the holders of claims in such class. I would ask you to delete that paragraph. I'm not prepared to make that conclusion of the law today.

Okay. Okay, thank you. 22B. I think I'm going backwards, so I apologize. I realize I'm going backwards. 22B says... Okay. Yes, please, sorry.

Let me know when you're there. I'm there, thank you, Your Honor. Okay, thank you. It's always horrible. virtually and I apologize for talking over everyone. Paragraph 22 talks about a procedure that says if a claim for which a proof of claim has been timely filed is identified as contingent, unliquidated, or disputed

and is not subject to a pending objection by the debtors, then such claim is temporarily allowed for, and then it goes on, I lost my page. So, so my, essentially I think it says, is temporarily allowed for voting purposes in a dollar, I believe is what it said. Working through these issues, I think what I would feel comfortable with in this paragraph is, and we can talk through it, is essentially says if a claim for which a proof of claim has been timely filed is identified in the proof of claim as contingent or wholly unliquidated.

and is not subject to a pending objection. And then it would be temporary allowed in a voting amount of dollar, of a dollar. I could get into my reasonings there, but I think it's just more specific. And I think to be disputed, once a proof of claim has been filed, you actually will need to file an objection to that. So I would ask that you make that change. Happy to, Your Honor. Thank you. Again, I apologize.

I'm all over the place. My papers got disorganized on the bench. I'm on paragraph 29 now. Okay, paragraph 29 says any timely received valid ballot starts with that. No issue with that concept. However, it's already even stated in paragraph 22 slightly in a different way, I believe. It's duplicative, but also not a completely duplicative. And so I would ask that for consistency that you delete either the statement in paragraph 22 or the paragraph in 29,

whichever you would see fit. Okay. Yes, Your Honor. Thank you. There's two more comments. Paragraph 30 talks about which ballots shall not be counted or considered for any purpose in determining whether the plan has been accepted or rejected. And I've been asking recently that these types of decisions be noted in the voting declaration.

There's quite a laundry list here. And unless it would be too burdensome. My view is that it would just, that they would, that the voting agent would just list what the ballots were that were not accepted and the reason why. Yeah, we get happy to make that change. Okay. And I do think the concept is captured later in the order, but it's not as specific. So if you feel you need to marry it, marry this concept in that, in that other paragraph. Again, I don't know what the paragraph number is, but to the extent you want to do that, that's fine.

It's your choice. and the final comment is the last sentence of paragraph 41 okay and it starts the notice and claims agent is required to retain all paper copies am i am i on the right paragraph number you said paragraph 41 i believe it is yes yes yes i'm following the notice and claims agent yes yes i believe that our notice and claims agent's requirements to retain papers is governed by procedures that are established by our clerk's office and set forth in local rules or separate orders. And so I do not feel comfortable approving this statement. I understand why the notice and claims agent may want it, but the notice and claims agent

must comply with the rules that are currently set forth, and it's not my place to supersede the local rules or what is set forth by the clerk of the court and so I'm not prepared to approve this the sentence okay thank you and I just have one thank you thank you and I just have one question it's not it does not require a change I don't think so but in the ballots I noticed that where you're describing the releases by the debtors there's a footnote and the footnote says any and all releases by the debtors or their estates remain subject to the ongoing internal investigation, nothing hearing shall constitute or be deemed a waiver. I was under the impression, perhaps mistakenly, that the investigation was complete and that

no causes of action exists. This seems inconsistent with the positions that have been laid out in the reply papers. So could you describe what the state of the internal investigation is? MS. Yes, Your Honor. Yes, Your Honor. My understanding that the investigation is substantially completed through its fact-finding portion. Its review and interview of the management and the diligence materials, documents, has been completed.

and they have not been able to identify at this point a basis for a claim as set forth in our disclosure statement. But, however, it is technically still open. Okay. As long as there's no inconsistencies between the disclosure statement and this footnote, I am fine with it. To the extent that the disclosure statement says that the investigation is complete, we need to marry these inconsistent. statements absolutely will do okay thank you well that's the extent of my comments and I reviewed the schedule and I have no issues with that schedule I am prepared to enter the order approving the disclosure statement and the

solicitation and voting procedures subject to the changes that we discussed on the record I would ask you to submit it under certification of counsel with a incremental redline from what was submitted today before the hearing so I can ensure that all the concepts have been captured. I'll leave it to the parties to discuss what the most efficient method is to ensure that the revised committee letter is submitted and the timing for that so that solicitation can begin. And so if there's a dispute with respect to that, because it's quite open, and there's some things that, significant changes that need to be made are substantiated. sensitive changes, I should say, and that may take time, and there's disputes that arise with respect to solicitation, and you know where to find me, and you can get me on the phone,

and we can talk through those issues, although I'm confident that, and hopeful that the parties would be able to work through those issues. To the extent that we, to the extent, or while this process unfolds, and it looks like the confirmation proceedings are going to be significantly contested, and I think the parties need to think of, and I'm sure you will, but I would like. them to think like you all to think about a discovery schedule if that's necessary deadlines for submitting declarations in advance so I have the opportunity to review them if if you feel as if the briefing schedule needs to be changed think

on that but the structure of the schedule as proposed to me seems sufficient at this time to the extent it looks like this is going to be end up being a massively contested confirmation hearing then perhaps we all need to get on the phone and talk about how that's going to be managed Okay, but I understand I think we'll have to wait and see how the process unfolds and if you need me during the process I'm available so with that unless there's anything else we need to discuss Allow you to will join the proceedings and you can work on modifying the disclosure statement order Thank you your honor all very much for your presentations today and your hard-working in getting the disclosure statement and the solicitation procedures to this point.

I appreciate everyone's efforts, and I appreciate the presentations today. Mr. Clodonis, did you need to talk to me about anything before we part ways? Just wanted to thank you, Your Honor. That's it. Okay. Thank you all very much. Enjoy your weekend and have a nice day. We're adjourned. You too.